Volkswacht Bodensee - Oil falls further, stocks mixed on US-Iran truce prospects

Oil markets have been up and down this week as investors assess the chances of a breakthrough agreement between Washington and Tehran that could potentially resume shipping through the crucial Strait of Hormuz.

Those hopes had been briefly dashed by new US military strikes on Iran Wednesday night, countered by the Revolutionary Guard's targeting of an American airbase in the region.

But by Thursday evening, negotiators had edged towards a deal to extend their fragile ceasefire for 60 days, pending approval from President Donald Trump, US sources told AFP.

The reports sent the S&P 500 index to another record high on Thursday, and Wall Street indices gained further at the open on Friday. Europe's main indices were mixed ahead of the weekend.

While the details of the possible agreement are scarce, "oil traders are taking an optimistic view that the end could be in sight for disruption in the region", said Derren Nathan, head of equity research at Hargreaves Lansdown.

However, "the market's patience may be tested if a deal is not agreed by early June, and this could have big ramifications for the oil price and the global stock market rally," said Kathleen Brooks, research director at XTB.

Concerns are also growing that the Federal Reserve and the European Central Bank may have to tighten interest rates after a run of gloomy indicators.

The Fed's preferred inflation gauge rose in April to its highest since 2023 and first-quarter US economic growth was revised lower.

In Europe, French data showed Friday that its economy contracted 0.1 percent in the first quarter, while inflation in May accelerated to 2.4 percent, above the ECB's target of two percent.

Germany meanwhile saw inflation slow in May to 2.6 percent, though analysts still expect an interest rate hike for the eurozone, possibly as soon as the next ECB meeting on June 11.

Still, "recession risks are easing as oil prices moderate and the probability of worst-case scenarios fades", wrote Matthew Martin of Oxford Economics.

"While reduced risks from the war have helped, the improvement in equity prices is mostly because of a robust earnings season. The driver is overwhelmingly AI-related capital expenditure," he said.

Global AI bullishness has driven a historic rally recently, this week pushing the market capitalisations of chipmakers Micron and SK hynix across the $1 trillion threshold.

Seoul's stock market led the charge in Asia on Friday, surging 3.6 percent while Tokyo's Nikkei closed at a record high.

- Key figures at around 1345 GMT -

Brent North Sea Crude: DOWN 1.7 percent at $91.14 a barrel

West Texas Intermediate: DOWN 1.5 percent at $87.57 a barrel

New York - DOW: UP 0.5 percent at 50,906.09 points

New York - S&P 500: UP 0.4 percent at 7,591.91

New York - Nasdaq: UP 0.5 percent at 27,044.93

London - FTSE 100: DOWN 0.1 percent at 10,416.09

Paris - CAC 40: UP 0.3 percent at 8,210.99

Frankfurt - DAX: DOWN 0.1 percent at 25,061.76

Hong Kong - Hang Seng Index: UP 0.7 percent at 25,182.39 (close)

Tokyo - Nikkei 225: UP 2.5 percent at 66,329.50 (close)

Shanghai - Composite: DOWN 0.7 percent at 4,068.57 (close)

Euro/dollar: UP at $1.1652 from $1.1647 on Thursday

Pound/dollar: UP at $1.3444 from $1.3441

Dollar/yen: UP at 159.28 from 159.25 yen

Euro/pound: UP at 86.67 pence from 86.66 pence

L.Stucki--VB